Local Government Pension schemes face cash flow crisis



Pensions

Pensions

Council figures have shown a worrying cash flow crisis that is starting to increase as Local Government Pension schemes begin to mature.

The large numbers of early retirements and forced redundancies will see many locals councils with less staff making contributions, leaving fully invested portfolios failing to keep pace with the short term increase in lump sum pension pay outs.

Warwickshire County Council have recently had to take out a £5 million cash loan to make up a cash flow shortfall due to the pay outs made to those taking early retirement.

Phil Triggs, the Warwickshire Country Council treasury and pensions group manager explained that the austerity measures had led to an “unforeseen call” because of the large number of pay outs as a result of early retirement and redundancy.

Nick Greenwood, Royal County of Berkshire Pension fund manager added that he felt these issues would become more and more common if local authorities continue to shrink, and the workload for admitted bodies continues to increase.

He added,  “If the schemes are getting more mature there will naturally be fewer active members and more retired and deferred members. Many schemes are going to move from immaturity to maturity over the next few years.”

Nick Rouse, manager of the Lincolnshire County Council Pension Fund added, “Inevitably I can see this is going to be one that’s going to happen to funds, they’re all going to have to look at the way they invest and maybe get into investments they can get out of a lot quicker.”

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